Using the material learned from the first three chapters, answer the following question. Vanishing Games Corporation (VGC)

Question:

Using the material learned from the first three chapters, answer the following question. Vanishing Games Corporation (VGC) operates a massive multi-player online game, charging players a monthly subscription of $15. At the start of 2017, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows: Cash $1,500,000 Accounts Payable $ 108,000 Accounts Receivable 150,000 Deferred Revenue 73,500 Supplies 14,700 Notes Payable (due 2019) 60,000 Equipment 874,500 Contributed Capital 2,500,000 Land 1,200,000 Retained Earnings 1,419,700 Building 422,000


In addition to the above accounts, VGC’s chart of accounts includes the following: Subscription Revenue, Licensing Revenue, Wages Expense, Advertising Expense, and Utilities Expense. 


Required: 

1. Analyze the effect of the January 2017 transactions listed below on the accounting equation, using the format shown in this chapter’s Demonstration Case B. 

a. Received $50,000 cash from customers for subscriptions that had already been earned in 2016 

b. Received $25,000 cash from Electronic Arts, Inc.  for licensing revenue earned in the month of January 2017

c. Purchased ten new computer servers for $33,500; paid $10,000 cash and signed a threeyear note for the remainder owed 

d. Paid $10,000 for an Internet advertisement run on Yahoo! in January 2017 

e. Sold 15,000 monthly subscriptions at $15 each for services provided during the month of January 2017; half was collected in cash and half was sold on account 

f. Received an electric and gas utility bill for $5,350 for January 2017 services; bill will be paid in February 

g. Paid $378,000 in wages to employees for work done in January 2017 

h. Purchased $3,000 of supplies on account 

i. Paid $3,000 cash to the supplier in (h) 2. Prepare journal entries for the January 2017 transactions listed in requirement 1, using the letter of each transaction as a reference. 

3. Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts. 

4. Prepare an unadjusted trial balance as of January 31, 2017. 

5. Prepare an income statement for the month ended January 31, 2017, using unadjusted balances from requirement 4. 

6. Prepare a statement of retained earnings for the month ended January 31, 2017, using the beginning balance given above and the net income from requirement 5. Assume VGC has no dividends. 

7. Prepare a classified balance sheet at January 31, 2017, using your response to requirement 6. 

8. Why does the income statement total not equal the change in cash?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals Of Financial Accounting

ISBN: 9780073527109

3rd Edition

Authors: Fred Phillips, Robert Libby, Patricia A Libby

Question Posted: